Small investors who saw their investments in Unit Trust of India (UTI) sour can take heart — with a little ingenuity and some luck, they can still turn the tables on a fortune that has betrayed them so far.

Investors can sell 5,000 US-64 units — the maximum allowed — at Rs 10.50 per unit (the prevailing repurchase price) to the UTI, buy an equal number at the net asset value (NAV) price of Rs 6 and pocket the difference. Those who make a killing this way will do so at the expense of the government and tax-payers, who will have to foot the scheme’s bailout bill.

However, there are sceptics like Dhirendra Kumar of Value Research who think investors would end up losers in the gamble. A premier agency that tracks mutual funds says existing unitholders should view their investments in US-64 like fixed deposits that swell 10 paise every month till May 2003 — when the repurchase price will be Rs 12.

Investors who exit and plough back the money in US-64 units bought at a lower price, says Kumar, can hardly expect dividends now. Mutual funds can offer returns only if their corpus is positive; US-64 is in the red. “Given the high chances of a dividend drought this year, it is better to remain invested. At least, the principal amount will fetch decent returns,” he reasoned.

Raising the repurchase limit from 3,000 to 5000 units will ensure that the government rescue protects most investors in UTI’s flagship scheme. The mutual fund major had taken several pre-emptive measures with the government to quell the panic that followed the announcement of an abysmal NAV. The government declared that it would pay the difference arising between the NAV and the repurchase price through an interest free and non-refundable loan to UTI.

However, if all unit-holders use the sale option as a once-in-a-lifetime opportunity, it would strain the resources of a fiscally-challenged government. On the other hand, investors who stay loyal will see a decline in interest income as interest rates tumble across the board. In such a situation, an arbitrage offers them a opportunity to increase their income. Especially, for those unwary investors who had invested in US-64 in the month of May at the then prevailing sale price of Rs 14.55.

Companies and banks that quit the scheme in April-May 2001 did so at unnaturally high prices of Rs 14.30/40, which cost the mutual fund dear in the days ahead. However, this time, the Trust has ensured that the government will foot the difference emerging out of a below-par NAV and the repurchase price of Rs 10.50.

UTI has also charged an interest on payments not received from the government. UTI officials had indicated earlier that out of the government subsidy bill of Rs 180 crore till November 30, 2001 almost Rs 40 crore is the interest component.

The January repurchase price for US -64 is pegged at Rs 10.50 and the Net asset value of US -64 is pegged around Rs 6, indicating that the government would foot the difference.

Only one NAV

UTI today decided to announce only one NAV even as it received redemption applications worth Rs 9.82 crore (Rs 12.02 crore on Tuesday) under its special repurchase window. A spokesperson said the NAV for US-64 was up by three paisa at Rs 6 (Rs 5.97 for reinvestment plan on Tuesday).

DUMPING WOES FOR STEEL FIRMS SPILL OVER

FROM VIVEK NAIR

Mumbai, Jan. 2:

The steep anti-dumping duties imposed by the US authorities last year has begun pinching the domestic steel industry. The industry now fears price pressures, as volumes meant for the US find their way to the local market.

This concentration in the domestic markets, sources said, has only resulted in compounding the problem of excess supply.

“Most manufacturers, who earlier used to export steel to the US, have not identified any alternative markets. They are now selling their products in the country. This has only resulted in bloating the inventory within the country,” said a senior official from a leading steel firm.

Sources added that this has only put fresh pressure on domestic prices, which are now ruling at rock bottom levels. However, industry circles now are not ruling out the possibility of prices hitting a downward spiral from the present levels, as consumption does not show any significant upswing.

Last year, the US had imposed an anti-dumping duty of 72.49 per cent and a countervailing duty of 12.82 per cent on CTL carbon plates. An anti-dumping duty of 29.35 per cent to 43.07 per cent and countervailing duty of 8.32 per cent to 31.94 per cent was imposed on HR steel flat products. These duties came despite the representation that India was a marginal exporter to the US, accounting for barely 3 per cent of US imports.

Estimates put Indian exports of steel at 3 million tonnes. Of this, a large chunk used to find way to developed nations such as the US, the European Union and Canada.

Among the few domestic companies who are now looking at alternate markets include the giant Tata Iron and Steel Company Ltd (Tisco). Speaking to The Telegraph, a Tisco spokesperson said that the company was developing alternate markets in West Asia, the Far East and other neighbouring nations.

The official added that Tisco is continuously looking at pushing up its volumes by stressing on the quality of steel produced and banking on a long-term relationship with its buyers.

CASH BAITS FOR POWER REFORMS

FROM OUR CORRESPONDENT

New Delhi, Jan. 2:

Union power minister Suresh Prabhu today asked the Central Electricity Authority to ensure that recalcitrant state power utilities prepare a detailed project report for spinning off power distribution into separate units within the next six months.

For states which implement the reforms, the Centre is dangling the carrot of extra incentives over and above those now being granted. Those who remain adamantly opposed to reforms may, on the other hand, get the stick, that is, find central assistance dearer.

Prabhu asked the CEA to intervene when its chief V.V.R.K. Rao presented him with a roadmap to carry out distribution reforms in the country. The roadmap emphasises the need for continuous mid-term reviews while implementing reforms in the sub-transmission and distribution sector, now perceived by the government as vital for the next stage of power sector reforms.

The minister told the CEA chief that the government would provide assistance in the form of grants-cum-loans to eligible states that have signed a memorandum of understanding with the Centre for milestone-based power sector reforms. “The minister hinted that a mechanism of incentives and disincentives may be examined depending upon the response by state governments to undertake reforms,” sources said.

The CEA has prepared detailed guidelines on all facets of distribution system reforms, including guidelines for project formulation, management and performance evaluation, energy accounting and audit, training of personnel deployed in the distribution sector and framing technical specifications for distribution equipment.

Besides, the committee has also submitted a report outlining the overall strategy for implementation of the guidelines, with time schedules for achieving the targets.

The expert committee on sub-transmission and distribution reforms was set up by the power ministry under the chairmanship of Rao as part of the accelerated power development programme (APDP). The main thrust of the CEA study is reduction of transmission and distribution losses, improving quality and reliability of power, consumer satisfaction and converting each distribution circle into a profit centre.

Initially, 60 distribution circles across the country have been identified for upgrading the sub-transmission and distribution system which will include 100 per cent metering, replacement and augmentation of transformation capacity, augmentation of distribution feeders and capacitor installation for power factor improvement.

ONGC LIKELY TO SWEETEN BID FOR PANNA-MUKTA

FROM OUR CORRESPONDENT

New Delhi, Jan. 2:

Oil and Natural Gas Corporation (ONGC) is likely to raise its bid for buying out Enron’s stake in Panna-Mukta and Tapti oilfields by 20-25 per cent.

A higher price is being seen as an attempt to beat the Ambanis, the other partner in the venture, in the race.

ONGC had made a “final” bid of $ 300 million to buy out Enron’s 30 per cent stake in the venture, of which ONGC owns 40 per cent and Reliance Petroleum (RPL) 30 per cent. Reliance, the third partner, is keen to grab Enron Oil’s pie.

Officials said ONGC’s decision to gain control of the oilfields was mainly a reaction to efforts by Reliance to dominate the venture.

“ONGC has been the leader in this venture with the single largest stake, it is also the most experienced. We want to retain control,” they added.

Even if ONGC manages to snap up Enron’s equity for $ 360-375 million, it would be cheaper than the $ 388 million that British Gas offered when it wanted to buy the stake in a deal that unravelled with the dramatic collapse of the Houston-based energy trading giant.

The UK major backed out after realising that the purchase of Enron’s stake was not enough to win control.

Sources say British Gas had tried to strike a deal with ONGC while bidding for Enron’s stake, offering $ 11.5 million or Rs 550 crore if the domestic upstream major relinquished its right to the status of “operator”. The state-owned company refused the offer.

“Operatorship” is a crucial status that gives the leader of a venture several rights and more revenues.

ONGC had also spurned another deal where it was offered a minority equity stake in a Brazilian oil-field that would have been under the leadership of British Gas.

Alarmed by the jockeying between Reliance and British Gas, ONGC has already started lobbying the government, insisting that it should be anointed “operator” officially because it owns the largest chunk of the equity — this was something that was earlier settled through a consensus. Officials say petroleum minister Ram Naik is inclined to support ONGC’s claim.

The fields are considered to be extremely profitable and naturally the war for its control is expected to be a tough one. They can produce about 300 cubic feet of gas and 29,000 barrels of crude a day.

EVEREADY LOSES TASTE FOR BULK, TURNS TO PACKED TEA

BY A STAFF REPORTER

Calcutta, Jan. 2:

The Rs 1,000 crore Eveready Industries India Ltd (EIIL) has decided to gradually exit the bulk tea business and put more of its teas into packets.

Addressing a press conference here today, Deepak Khaitan, executive vice-chairman and managing director said the company would expand its packaged tea business substantially and was planning to sell off its non-performing assets to retire huge debts.

The company greeted the new year with the introduction of ‘Greendale’— a set of corporate values which will guide its operations. “The Greendale concept which stands on three pillars—companionship with the consumers, tangible differentiation in quality and consumer proximity will guide our corporate philosophy in the coming days.”

Further, EIIL’s promoters—the Khaitans—plan to lower their stake to 51 per cent from the present 55 per cent, in two to three years’ time. The company is in talks with several strategic investors but nothing has been finalised yet. The institutions hold 17 per cent in the company while the rest is with the public.

The company, which now sells 60 lakh kgs of packed tea, plans to increase that figure to 20 million kgs in two to three years. EIIL has three brands of packet tea—Tez, Jago and Premium Gold.

Speaking on the sidelines of the press conference, Aditya Khaitan, director of EIIL said, “After the sale of our Darjeeling gardens we will be left with 33 million kgs of tea. We would like to sell some of our gardens in Dooars and Assam to bring down our production to 27 million kgs. This will generate around Rs 200 crore which will help us to retire high-cost borrowings and boost the packet tea marketing. Similarly, the exercise to sell a portion of our stake in EIIL will generate funds for us which will help us in the brand-building exercise and retire debts.”

The company, which currently sells 60 lakh kgs of packed tea, plans to increase that figure by 20 million kgs. EIIL has three brands of packet tea—Tez, Jago and Premium Gold.

Aditya Khaitan further said that the financial institutions and banks have rescheduled loans worth Rs 600 crore out of the total Rs 849.25 crore. “They have granted us a three-year moratorium followed by a repayment schedule of seven years. The interest has also been waived by two and a half per cent,” he said.

The demerger of the battery and tea businesses will also take another couple of years. It enjoys a 65 per cent market share in the battery business.

MOREPEN LINES UP SIX NEW DRUGS

FROM RAJA GHOSHAL

New Delhi, Jan. 2:

Morepen Laboratories Ltd is introducing new formulation drugs in diabetes, cardiology and neuropshchiatry in the next four months. Apart from this, it will also launch one insulin product by March.

Morepen chairman Sushil Suri told The Telegraph the company will bring in a host of new products from its stable to combat diabetes which includes formulation drug Pioglitazone and Metformin. “We plan to bring in Pioglitazone within two months and Metformin by April,” he said. For both these drugs, it is awaiting marketing permission from the Drugs Controller General of India.

Morepen will launch Y’ Sugar, a low calorie sweetner. “This will be a sub-brand within the Dr Morepen brand of over the counter products,” he said.

In cardiology, the company will unveil its formulation drug Candesartan by June and Carvedilol by September.

Morepen, which already has five drugs related to neuropshyciatry, plans to introduce Olanzapin by June.

TWO-WHEELER FIRMS READY FOR JAN. JOUST

FROM SHASHWATI GHOSH

New Delhi, Jan. 2:

The two-wheeler market will be heating up in the weeks ahead with motorcycle and scooter firms vying to woo the consumer with new offerings.

Hero Honda—the country’s largest motorcycle maker will lift the veil of secrecy on a set of 125-plus cc mobike models. “We will showcase the future models to come in the market in the forthcoming auto show. More importance has been given to the safety equipment and accessories,” said Atul Sopti, vice-president of the Delhi-based giant.

Its former partners, the Japanese Honda, through its two-year-old venture Honda Motorcycle & Scooter India Pvt Ltd, is gearing up with four new scooters which are being fitted out for Indian roads. But except for one, not all of them will be launched now. The rest will have to wait for the consumer’s response, explained company spokesperson Rajiv Pruthi.

Pune-based Kinetic Engineering Ltd will showcase their 4-stroke scooter Nova, which will be pitched against Honda’s Activa. Just a few months back the company had launched its first automated bike GF 125. The performance bike was pitched against TVS Suzuki’s Fiero and Hero Honda’s CBZ.

The reason for the sudden flurry of action in the otherwise sleepy two-wheeler market is a 13 per cent growth witnessed in this segment even as the car market went into a recession, with a negative growth of
4 per cent during the last nine months (April-December 2001) compared with the same period in 2000.

Moreover, in the really fast-selling mobike market, growth during this period has been a whopping 31 per cent.

Another player, Hero Puch, will present concept models of two four-stroke scooters and two mopeds at the forthcoming Auto Expo, slated to begin on January 15 this year.

“Our presence will be through the engineering department that will showcase the concept models of four two-wheelers. They are not really meant for future launch. We basically want to show off technology,” Shubhendu De, general manager marketing said.

LML Limited will be coming in with two new motorcycles—Adreno FX and Energy FX—variants of existing bikes. “The products are prototypes and need to worked on. Future launches of both models will depend on the response in the show,” the company spokesperson said.

TVS Motor Co is expected to come out with variants of Victor for the auto show.

The most interesting launch perhaps, will be from Asta Motorcycles & Scooters India Ltd, an Indo-Chinese joint venture with Zongyu in China.

“It is a technical collaboration and we will be bringing in two motorcycle models—a 125 cc and another 110 cc. Scooters will also be there but they are not scheduled to be launched immediately. The motorcycles will be brought in by the CKD route and will be assembled at our Bangalore plant,” company sources said.

ERICSSON RENAMES INDIA DIVISION

FROM OUR CORRESPONDENT

New Delhi, Jan. 2:

Ericsson Telecommunications Private Limited today renamed its Indian operations as Ericsson India Private Limited. The company has received necessary approval from the Registrar of Companies, officials said.

Last year, Ericsson had
amalgamated its wholly-
owned subsidiaries in India —Ericsson Telecommunications Limited and Ericsson Communications Limited — to create a combined entity which would cater to the wireless and wireline convergence opportunities in the domestic market.

As a result of the merger, the company has been able to synergise operations, consolidate its resources and bring cost-efficiency, officials said.

“As a part of our scheme of amalgamation, we proposed renaming the merged entity as Ericsson India Private Limited which has been officially recognised,” said Jan Campbell, managing director, Ericsson India.

Ericsson India Private Limited will remain a wholly-owned subsidiary of Telefonaktiebolaget L.M. Ericsson, Sweden. The company will continue
to focus on mobile infrastructure business besides introducing new technologies and products.

It has installed over 1.3 million fixed lines and 21 out of the 43 GSM networks in India.

Prices of partially-oriented yarn (POY) and polyester staple fibre (PSF) were brought down, with POY prices being cut to Rs 53.55 per kg, down Rs 2.15 per kg from December levels. Similarly, PSF prices were revised to Rs 41.75 per kg, down Rs 2 from the previous month. Industry circles said that the price cuts for POY and PSF followed the trend of soft international prices in both these commodities.

Among fibre intermediates, monoethylene glycol (MEG) was cheaper by Re 1, at Rs 25.25 a kg. Sources said that due to stable prices of crude and other intermediates globally, coupled with the ample availability of both PSF and POY, international prices of these commodities were ruling at around $ 80 cents per kg and $ 60 cents per kg respectively. Even as international prices remain soft, the domestic industry has been characterised by huge capacity build-up that has raced ahead of demand, putting pressure on prices.

Besides, local industry also has had to contend with imports. This scenario, sources said, has led to manufacturers offering discounts to buyers while finalising supply arrangements.

RIL however, increased PVC prices by Re 1 to Rs 31.05 per kg. On the other hand, it retained prices of several products at December levels, such as polyethylene terephthalate (PET) at Rs 55 per kg, purified terephthalic acid (PTA) at Rs 27.10 per kg, PE at Rs 38, polypropylene (PP) at Rs 36.25 and linear alkylbenzene (LAB) at Rs 53.90.

Though RIL is a well-integrated company, the tough phase in the petrochemical industry worldwide has been reflected in its second quarter performance for the current fiscal. In fact, net sales during the second quarter declined by over 7 per cent to Rs 6,234 crore, indicating the beating its volumes have taken. RIL officials had then explained that the company was passing through one of its toughest times and that it was not only the margins that were under pressure, but product prices had also breached 10-year lows.

Q3 results on Jan 31

Analysts are now waiting for the company’s performance in the third quarter, results of which are expected to be declared on January 31. Optimists aver that RIL will be in a position to tide over the challenging environment by banking on volumes, even as margins will remain under pressure.